Every options contract has an expiration date. This is the date when the contract either gets exercised or becomes worthless. Understanding expiration dates is fundamental to options trading because it affects pricing, strategy selection, and risk management.
What is an Options Expiration Date?
An options expiration date is the last day an options contract is valid. After this date, the contract ceases to exist. If you own an in-the-money option at expiration, it will typically be automatically exercised. If your option is out of the money, it expires worthless and you lose the premium you paid.
Key Point: Options expiration is not negotiable. Once the expiration date passes, the contract is gone. This is why time management is so critical in options trading.
Types of Expiration Cycles
Options come with different expiration timeframes to suit various trading strategies and objectives.
Weekly Options (Weeklies)
Weekly options expire every Friday and are available for the most liquid stocks and ETFs. They offer short-term trading opportunities but have rapid time decay. Traders use weeklies for quick directional plays or income generation around specific events like earnings.
Monthly Options
Traditional monthly options expire on the third Friday of each month. These are the original options expiration cycle and still carry the most liquidity for many stocks. Monthly expirations give traders more time for their thesis to play out while still maintaining reasonable time decay characteristics.
Quarterly Options
Some products offer quarterly expirations that coincide with the end of fiscal quarters. These are particularly popular for index options and are used for longer-term hedging strategies.
LEAPS (Long-Term Equity Anticipation Securities)
LEAPS are options with expiration dates one to three years in the future. They behave more like stock ownership because time decay is minimal in the early stages. Investors use LEAPS for long-term directional bets or as stock replacement strategies.
When Exactly Do Options Expire?
The timing of options expiration can be confusing because there are multiple important times to understand.
Important Expiration Times
- Last trading day: Options stop trading at 4:00 PM Eastern on expiration Friday for most equity options
- Exercise deadline: The deadline to submit exercise instructions is typically 5:30 PM Eastern on expiration day
- After-hours risk: Stock can move after the market closes, affecting whether your option ends up in or out of the money
Index options like SPX have different rules. They often stop trading on Thursday and settle based on Friday morning opening prices. Always verify the specific expiration rules for what you are trading.
How to Choose the Right Expiration Date
Selecting the appropriate expiration date depends on your trading strategy, market outlook, and risk tolerance.
For Directional Trades
Give yourself enough time for your thesis to work. If you expect a stock to move within two weeks, consider buying options with at least 30 to 45 days until expiration. This buffer protects you from time decay eating your position if the move takes longer than expected.
For Income Strategies
When selling options for premium, shorter expirations often provide better risk-adjusted returns. The 30 to 45 day timeframe is popular because theta decay accelerates but you still have time to manage positions if they go against you.
For Event-Based Trades
If you are trading around a specific event like earnings, choose an expiration that includes the event. Weekly options are popular for earnings trades because they minimize time value and focus the trade on the event outcome.
The Expiration Cycle Calendar
Options follow specific cycles that determine which months are available for trading. The traditional system assigned stocks to one of three cycles.
- January cycle: January, April, July, October
- February cycle: February, May, August, November
- March cycle: March, June, September, December
Today, most actively traded stocks have options available for the current month, next month, and then follow their assigned cycle. Weekly options have made this system less relevant for short-term traders.
Expiration Day Risks
Expiration day brings unique risks that every options trader must understand.
Pin Risk
When a stock trades very close to a strike price at expiration, it creates uncertainty about whether options will be exercised. This is called pin risk. Market makers and large traders sometimes try to push stocks toward strike prices where they have the most options exposure.
Assignment Risk
If you are short options that are in the money at expiration, you will be assigned. For call sellers, this means delivering stock. For put sellers, this means buying stock. Make sure you have the capital and shares to handle assignment.
After-Hours Movement
Stock prices can change significantly after the 4:00 PM close. An option that seemed safely out of the money might become in the money based on after-hours trading, triggering unexpected exercise.
Pro Tip: Close or roll positions before expiration day to avoid these risks. Most experienced traders avoid holding options into the final hours of expiration day unless they have a specific reason.
Managing Positions Near Expiration
As expiration approaches, you have several choices for managing your positions.
- Close the position: Sell to close if you have profits or want to cut losses
- Let it expire: If worthless or deep in the money with clear outcome
- Roll the position: Close current position and open a new one with later expiration
- Exercise: Convert options to stock position (rarely optimal due to lost time value)
The best choice depends on your market outlook, the remaining time value, and transaction costs. Rolling is popular when you want to maintain exposure but need more time.
Expiration and the Greeks
As expiration approaches, the option Greeks behave differently. Theta (time decay) accelerates dramatically in the final weeks. Gamma increases for at-the-money options, making delta changes more volatile. These dynamics create both opportunities and risks.
Sellers benefit from accelerating time decay near expiration. Buyers face the challenge of overcoming rapid premium erosion. Understanding these dynamics helps you select appropriate expiration dates for your strategy.
Track Your Expiration Dates
Pro Trader Dashboard automatically tracks all your options positions and their expiration dates. Get alerts before expiration so you never miss a management opportunity.
Summary
Options expiration dates are a fundamental aspect of options trading that affects everything from pricing to strategy selection. Weekly options provide short-term opportunities, monthly options offer a balance of time and decay, and LEAPS allow for long-term positioning. Choose your expiration dates based on your strategy requirements and always manage positions before expiration to avoid unnecessary risks.
Want to learn more? Read our guides on what happens when options expire and how to roll options positions.